When Silicon Valley Dabbles In Journalism

In response to TNR’s implosion, Lucia Moses considers why applying tech solutions to media so often ends in tears:

“They’ve arrived from Mars with the typical arrogance of a tourist, over-noticing the wrong things,” said Jason Pontin, editor in chief and publisher of MIT Technology Review. “If there were a simple solution, smart people like me would have done it. Publishing is an extremely fidgety business with a direct cost, a base that is in many cases unwilling to pay for the product, and an indirect audience in marketers and advertisers who have found increasing efficiencies, which have driven down CPMs.”

Apart from that, it’s a great industry to work in! McArdle compares media and tech industries:

In many ways, a company such as Facebook and eBay is the opposite of a media company.

Those companies have huge network effects, and they get their content for free or nearly free. Making a lot of money out of a business like that is hard — many more attempts have failed than succeeded. But a prestige media company makes expensive content that has zero network effects; you can’t copyright a fact. In the new digital world, hours after your expensively reported story is out, dozens of other outlets will have re-reported the same facts and taken some of the traffic. Making a lot of money out of a business like that is much more difficult. Chris Hughes was not insane to think that he could make something like a New Yorker for Washington. It was, however, pretty crazy to think that you could do so without losing a bunch of money.

You need only read the stories about FirstLook and The New Republic to understand how badly tech-style management assumptions translate into media. When that approach failed, spectacular public meltdowns ensued. So the new moguls now learn another key difference about the media business: You are always being closely watched, so communications, and effective crisis management, are supremely important. A spectacular HR crisis translates more directly into loss of reputation, and sales, than it does almost anywhere else.

Drezner is in the same ballpark:

I’ve heard a lot of nonprofit sector folk complaining that Silicon Valley investors want to revolutionize their field without really understanding it.

The pattern in each of these cases is that a fabulously wealthy and successful investor enters a new and not-terribly-successful sector and tries to apply the lessons learned from the investor’s past successes to this new area. Except that there’s not a ton of evidence that those lessons are truly generalizable. One almost wonders if there is an extension of the Peter Principle for investors.